To: Detroit Workers' Voice mailing list
April 26, 2016
RE: The IMF and the WOrld Bank push for the carbon tax

Earth Day 2016 revisited:
The IMF, the World Bank, and
the neo-liberal carbon tax

By Joseph Green

Workers around the world are being devastated by the market
fundamentalism of the so-called "Washington Consensus", which is
identified with such institutions as the International Monetary Fund
(IMF) and the World Bank. These institutions are helping submerge the
world in wave after wave of privatization, wage-cutting, elimination of
entitlements, and "structural readjustment". They promised that market
measures would bring economic development and prosperity, but the
result has been misery on a mass scale, with entire countries
devastated one after another.

So it should cause people to think twice that the IMF and the World
Bank are now pushing hard for "carbon pricing" as the solution to the
threat of global warming. Can such harmful institutions be correct
about the path forward for environmental reform? The IMF is especially
dead set on the carbon tax, while the World Bank would also accept cap
and trade programs.

I have discussed elsewhere what's wrong with carbon taxes and carbon
pricing; some references are listed at the end of this article. Here
let's examine how the IMF and World Bank see the issue. How they
envision the carbon tax will be far more influential than the beautiful
pictures drawn by some other advocates of the carbon tax.

The UN's global climate summit in Paris of November 2015 ended in a
lot of promises, but not much in the way of binding commitments.
Serious environmentalists like James Hansen denounced the results of
the Paris summit, but 175 leaders of bourgeois governments made a great
display of signing the resulting accords on Earth Day, April 22, 2016.
The New York Times carried a
number of articles on the occasion of these events; one of the most
significant ones, by Coral Davenport, noted the increasing role played
by the IMF and the World Bank: "Carbon Pricing Becomes a Cause for the
World Bank and the I.M.F." (1).
She reported that these institutions
"are pressing governments to impose a price tag on planet-warming
carbon dioxide emissions, using economic leverage and technical
assistance that instistutions like the United Nations cannot muster."

Perhaps this will sound good to some people, as if these
institutions were now on our side. But let's see. Christine Lagarde is
the Managing Director of the IMF. In an article entitled "Ten myths
about climate change policy", she talks about how the carbon tax is a
replacement for direct government action on the environment, which she
regards as impractical. She supports the carbon tax as part of seeking
to slow down other actions. (2)
She writes:

"Myth number two is that a plethora of complex and
cumbersome government policy interventions is the best way to reduce
emissions, carbon dioxide being the most important--subsidies for wind
farms, solar panels, biofuels, public transport, electric vehicles;
regulations on the energy efficiency of buildings, lighting, cars,
planes, water heaters, refrigerators, industrial machinery, etc. I
would push back somewhat on this approach as it is inefficient for
climate policy and administratively complex."

It's notable that in Lagarde can barely conceive of government
action beyond subsidies and minor regulations, but she doesn't even
want to see those actions.

The World Bank, for its part, joined with its partners in "formally
launching the Carbon Pricing Leadership Coalition." (3) It, too, wants
carbon pricing to replace direct governmental measures to prevent
greenhouse emissions. It says that "Instead of dictating who should
reduce emissions where and how, a carbon price gives an economic signal
and polluters decide for themselves whether to discontinue their
polluting activity, reduce emissions, or continue polluting and pay for
it." (4) So the governments
aren't supposed to ban harmful fossil
fuels, or dictate a path to their elimination. And environmental
organizations aren't supposed to push companies to do things they don't
want to do. Instead, the World Bank wants us to follow another path:
Leave it to the market. Leave it to the polluters themselves to have a
change of heart when they look at their pocketbook. Don't restrict and
eliminate coal mining, fracking, etc. Just change the carbon pricing,
and let the polluters take care of everything else.

The IMF and World Bank assure us that the carbon tax is supposed to
fall on the polluters, and imagines that the pain it causes these
polluters is supposed to cause them to abandon fossil fuels. The World
Bank says "A price on carbon helps shift the burden for the damage back
to those who are responsible for it, and who can reduce it." (4)

But this is a lie. Carbon pricing is *not* a tax on the profits of
the fossil fuel companies, and it doesn't directly effect their
profits; the tax is imposed on the consumers of energy, or it is passed
on to the consumer by the energy companies. These consumers include
large-scale manufacturing firms, which will in turn pass on the tax to
their customers. Workers, however, can't pass on the tax. Small
truckers, fisher people, and others generally can't pass on the tax
either. But the energy companies and other large corporate polluters
can and will make their customers pay.

Thus those who are mainly responsible for pollution won't be paying
the tax. Those who have the most influence on energy production and how
it is done, such as those who plan fossil fuel projects and profit from
them, won't be affected. But working people, who have little influence
on what the energy companies and big corporate polluters do, will pay
through the nose; it's the people who have little influence who will be
strongly affected by the carbon tax. Surprise, surprise. Another World
Bank policy will end up benefiting the rich while harming the poor.

The truth is that carbon pricing threatens to convert the slogan
"let the polluters pay" into "make the people pay". It's one
thing to campaign against the profiteering of Big Energy; it's another
to campaign to have the masses pull in their belts still further. The
only realistic hope for the environment is that larger and larger
masses of people put increasing pressure on the governments and the
corporate polluters. But a steep carbon tax may well alienate millions
of working people from the environmental movement.

Well, where will the revenue from the carbon tax go? Some activists
want the carbon tax to be revenue-neutral. Others want to use some of
the revenue from the carbon tax for environmental projects. The IMF and
the World Bank, however, see the carbon tax as a piggy bank for the
bankers and financiers; they see it as a way for countries to pay off
their loans. Coral Davenport reports that the I.M.F., "often seen as
the world's lender of last resort", sees the carbon tax "in part as a
way for struggling nations to raise more revenue". She identifies Ian
Parry as the "principal environmental fiscal policy expert at the
I.M.F." and quotes him saying "...for a country facing a large deficit,
we could recommend that they use carbon pricing as a way to
simultaneously meet their pledges in Paris and close their deficit." (5)

And that's not all. The IMF also sees the carbon tax as a way to cut
business taxes. They envision a tax shift which will serve "to cut
other taxes..., such as taxes on labor and capital". (6) So the large
corporations, which can pass on the carbon tax to their customers, may
at the same time benefit from cuts in business taxes.

Meanwhile the IMF is demanding the removal of fuel and other
subsidies from the mass of the population. Lagarde claims to be
concerned about what this will do to the poor. She writes that
"Targeted measures (e.g., adjustments to the tax system, stronger
social safety nets) are generally a much better way to help the poor."
(7) But in practice, these other
measures just never seem to appear;
indeed, the whole point of IMF structural adjustment is tear up the
safety net. A real alternative to the present system of subsidies in
various countries would have to include serious economic planning for
mass welfare, and guarantees for the people's welfare, combined with
government programs that ensure there are alternatives to
environmentally harmful fuels and products; but the IMF and World Bank
are opponents of such planning and of such a government role.

The arguments made by the IMF and World Bank for carbon pricing and
the carbon tax are quite similar to their arguments for privatization
of water and other services. It's all part of the same program in their
view, and we hear the same promises, the same arguments. It's a
fill-in-the-blank boilerplate economic argument. So why should the
results be different? Is it conceivable that the neo-liberal program
will fail in everything else but save the environment?

The IMF and the World Bank are advising governments about how to
plan their systems of carbon pricing. So the working class and the
militant environmental movement need to pay attention to the IMF and
the World Bank, and decide their attitude to the market measures backed
by the IMF and World Bank. Should we believe the sugared words of the
IMF and World Bank, or look at the real results of the "Washington
Consensus", privatization, and neo-liberalization?

Today part of the bourgeoisie still denies that human activity is
causing global warming. Another part of the bourgeoisie talks about
global warming and even claims to be taking measures against it. But
it's not taking effective measures. It talks and talks, and signs one
solemn pledge after another, and greenhouse emissions get higher and
higher. Some measures the bourgeoisie has taken in the name of
environmentalism has actually made things worse, such as the promotion
of natural gas and fracking, or the World Bank financing the building
of the huge Medupi coal power station in South Africa. (8) We need to
consider whether the emphasis on carbon pricing is another fiasco of
world neo-liberalism, which sabotages the environment for the sake of
providing many profitable opportunities for large corporations and the
rich. Do we really want to bet the fate of our planet on the supposed
wisdom of the IMF and the World Bank?